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Financing Your Business

Here’s How Headway Capital Decides Whether to Give You Money

Last Updated on October 20, 2016

Eric Goldschein is a staff writer at Fundera. He covers entrepreneurship, small business trends, finance, and marketing. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, the Huffington Post and more.

Applying for a line of credit from Headway Capital only takes a few minutes. As we talked about in the first part of our series on Headway Capital, their three-step application is easy to access, fill out, and finish. The next stage is the underwriting process.

Any small business owner who has applied to a major financial institution or alternative lender for a loan probably knows about underwriting… But for those new to the business of obtaining capital, it goes like this:

Underwriting is essentially when a lender decides whether or not to take on the risk of lending you money. They take time to review the information and documents you provided, trying to figure out how “credit-worthy” you are. They’ll make a judgment of whether your business needs a line of credit, loan, or credit card, and whether you’ll be able to pay it back. If they find that you do indeed stack up, they’ll move ahead and disburse your funds or make your line of credit available.

Let’s go through Headway Capital’s underwriting process, including what leads up to it, what’s involved, how long it takes, and when you can expect funding.

How do you get to the underwriting stage with Headway Capital?

As discussed in part one, Headway Capital’s online application asks small business owners for personal and business information, from your name and address to total revenue from the previous year. The third step of the application is receiving a quote from Headway Capital and deciding how you’ll use the money: choosing the repayment term, an initial draw amount on the line of credit, and whether to make weekly or monthly payments.

To affirm these choices, you sign a contract and agree to send Headway Capital some required documentation: three most recent months of bank statements and, in some cases, your two most recent years of tax returns or a profit/loss if your business is a sole proprietorship.

“It’s in the customer’s hands to upload the bank statements, but we make it really easy for them to do by offering electronic submission through DecisionLogic,” says Alyssa Ingle, Strategy & Operations Associate at Headway Capital. DecisionLogic is a secure online bank verification system that helps borrowers and lenders get the ball rolling. All you need to do is enter their bank online ID and password… And that’s where the underwriting process begins.

What goes into Headway Capital’s underwriting process?

Business owners who make it to this point in the process will then receive a call from a Headway Capital underwriter for what Ingle describes as a quick phone call, no more than 5-10 minutes. This call is to give Headway Capital the chance to ask questions and get a more well-rounded picture of the business they’ll be funding.

The types of questions underwriters might ask include…

Confirmation of the previous years’ revenue.

A projection of the current year’s annual gross revenue.

A general description of the business, covering what the business does and what the long-term goals are.

If the business is seasonal, in order to better understand your cash flow—such as a landscaping business, which expects to have higher revenues in spring and summer than fall or winter.

“Those would be the major questions—just to get a better understanding of the business and how it runs,” says Ingle.

And for business owners, that’s about it. When it comes to applying for a business, your job is done.

The rest of the underwriting process is in the hands of the people at Headway Capital. Underwriters make the final decision on whether a business will receive their line of credit.

How long does this process take?

Headway Capital prides itself on its flexibility, transparency, and speed. And it’s speed you really care about for underwriting.

“The customer is then notified later that day or the next morning if they’ve received funds or not,” says Ingle. “And the funds come through an ACH payment into their bank account.”

That’s right: you can go from uploading your financial documents to receiving a line of credit up to $35,000 in a matter of hours, if everything goes smoothly.

Ingle says that someone who starts their online application on Monday morning can have their funds by Wednesday. More often than not, there’s a 2-3 day time lapse between the beginning of underwriting process and funding. But most of that comes from giving business owners time to upload their financial documents… So keep your head in the game when it comes to this step, and you won’t need to wait long for your financing!

What comes next?

The last step, which we’ve already begun to tackle here, is the funding procedure from Headway Capital. We cover that—including how you’ll receive funds, the expectations for repayment, and how to continue to receive funding in the future—in part three of our series.

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As simple and straightforward as Headway Capital’s application process is, the underwriting process might be even easier. For business owners who have to juggle so many responsibilities, it’s good to know that acquiring funding can be as easy as uploading your financial history and talking to an underwriter for a few minutes. Check out the final step in part three.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those
of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Eric Goldschein is a staff writer at Fundera. He covers entrepreneurship, small business trends, finance, and marketing. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, the Huffington Post and more.